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Received a CP2000 from IRS on Retirement distributions I am…

Received a CP2000 from IRS...
Received a CP2000 from IRS on Retirement distributions I am 54 years old and closed my retirement accounts when I became disabled I am on SSDI now and didn't think I had to pay the 10% penalty
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Answered in 3 minutes by:
12/14/2017
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,326
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Hello Jeff,

My name is ***** ***** I will assist you.

The CP2000 is a notice from the IRS that you may agree or disagree with.

There is an exception to the 10% penalty if you are currently disabled. You should reply to the CP2000 notice and inform the IRS of your disability, preferably backed with a doctors note

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Below is an excerpt from the instructions of IRS Form 5329

https://www.irs.gov/pub/irs-pdf/i5329.pdf

"Distributions due to total and permanent disability. You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A medical determination that your condition can be expected to result in death or to be of long, continued, and indefinite duration must be made. "

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Customer reply replied 5 months ago
A letter benefit verification letter for Social Security Admin that I am receiving monthly disability payment will not work

Generally you would submit IRS form 5329 along with your tax return.

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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,033
Experience: 35 years tax experience, including four years at a Big 4 firm.
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I see you have requested a new professional. I'm PDtax. I can assist.

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You will want to file an amended return, form 1040x, to correct the penalty charge. In it, you report your income and the IRS revision on column 1, then correct the penalty in column 2, then reflect the numbers you originally filed in column 3.

You will need to attach a form 5329 which claims your disability exception. And, you are correct, your social security disability letter will not be IRS accepted proof. Their definition is different for disability then SSDI.

You will need third party proof that addresses your disability and your inability to be employed.

Along with properly completing the form, you should submit at least one signed letter from a licensed physician attesting to the severity of your disability. That will generally satisfy any questions IRS might otherwise have. Once you provide appropriate evidence from a doctor, it’s usually enough to satisfy IRS that you are, in fact, disabled enough to claim the exception.

I suggest the amended return because IRS is a paperwork agency, and your response is processed better with the appropriate paperwork. Both the 1040x and 5329 with third party support will be needed and are processed much more easily than support you create.

Thanks for asking at just answer. Good luck with your response. Positive feedback is appreciated, five stars being best. I'm PDtax.

PDtax
PDtax, Certified Public Accountant (CPA)
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